Wednesday update

SHORT TERM: gap up opening, DOW -42

The first two days of the week markets worldwide have seen selling, especially in Asia and Europe. The US had two gap down openings, but recovered more than half of the early morning decline each day by the close. Today markets settled higher in Asia, and mixed in Europe. The SPX gapped up to 2773 at the open, had closed at 2763, then dipped to 2764 by 10:30. After that the market worked its way higher to reach SPX 2775 by 1pm. Then pulled back to close at SPX 2767.

During yesterday’s decline the SPX dropped to 2743. This was an important level because the high of our Minute wave i was at SPX 2742. No overlap occurred, and the market has rallied 32-points from that low. Short term trend remains up unless those levels are broken to the downside. Short term support SPX 2741/42 and the 2731 pivot, with resistance at the 2780 and 2798 pivots. Short term momentum hit overbought during today’s high, then declined to neutral. Best to your trading!

MEDIUM TERM: uptrend

LONG TERM: uptrend

CHARTS: http://stockcharts.com/public/1269446/tenpp

About tony caldaro

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448 Responses to Wednesday update

  1. mcgcapital:
    The A-D line certainly does put the appropriate weight on how many stocks go up or down a given day. If you only added in a + 1 or – 1 for up or down days, your objection would be correct, but that is not how the index is constructed. The total number of declines are subtracted from the total number of advances and that difference, whether positive or negative, is added to the previous day’s total.
    If you want adjustment by volume, look at the on balance volume as well. The A-D line did warn of the steep early fall 2016 correction. Why don’t you post charts of the 2015 A-D line and SPX price chart so we can see the failure to forewarn that you referred to?

    • mcgcapital says:

      Hi George, my point with it was that markets tend to take the stairs up and the elevator down. So if you take an example of every stock on the index falling 3% on one day, that would be a cumulative -2000 (or however many stocks are in the calc) added to the A/D line. Then if every stock were to retrace that fall and add 0.3% a day for 10 days, you’d be adding +2000 a day to the A/D line. So over 11 days you’d have an A/D line that was +18000 and a market that was flat. Obviously that’s an extreme example. What people are hoping to use it for is to show that most stocks are already in downtrends hence the market is weakening prior to the wider market falling, then using that as a signal to get out.

      https://en.m.wikipedia.org/wiki/Advance–decline_line. Wikipedia says that it didn’t start diverging until March 2008 in the last bear, which is a full 5 months after the high. Who’s to say that can’t happen again and the market hasn’t already peaked in January 2018 with the A/D line about to diverge? We just don’t know. On 2015/16, I was meaning that the line did diverge and we also got a negative crossover on the monthly MACD, so anyone using these indicators would have been thinking ‘this looks similar to 2000 and 2008’. But quite shortly after we began the huge rally we’ve had. So although we did get a correction that time, I’d regard it as a false signal for a bear market.

      Each market environment is different and unique. If you invest in the US equity market on a market cap weighted basis then the biggest factor on your returns will be how large caps do. A lot of these companies are global, not US centric. There are a number of potential reasons why small caps are doing well. It could be the stronger dollar, it could be the fact that the US economy is the strongest at the moment and they’re more domestically focused, it could be that they’re the ones getting the biggest sugar high from the tax cuts, or that Trump’s America first agenda is seen as benefitting small American companies at the expense of those exposed to globalisation.

      My point is… the bulk of equity market returns come from large caps. Just because small caps have risen that doesn’t mean that large caps have to follow. I prefer looking at price to any of these indicators. And price is still saying there’s indecision and a lot of volatility. 2800 is key and so far it hasn’t taken it out. Just because small caps and the A/D line are doing well, that is providing zero info on whether or not we’re going to break this trading range up or down. It’s difficult at the moment to hold trades in either direction, have to stay very nimble

      • tommyboys says:

        1) If every stock in an index went UP for ten days the index would NOT be flat. Same if they all went down. I dex would be in line with A/D in either of these scenarios.

        2) The A/D I follow sure did negatively diverge for almost a year prior to the ’07 top & two years prior to the ’00 top. A/D I follow positively diverged for months prior to the ’09 bottom…🤔

        • Anne Day says:

          Tommy, which/what A/D are you following?

        • mcgcapital says:

          For point 1 you’re misreading what I’ve written.. if we went down 3% on day 1 then rose 0.3% for 10 days on days 2-11, we’d be flat. (1+ -3%) * (1+ 0.3%)^10. Obviously doesn’t quite equal 1 due to compounding, would need to adjust the numbers slightly but you get my point. The A/D line would register 10 times the number of advancers over the same period wouldn’t it as there’s no weight given to how much we rise or fall by.

          Point 2 I’m not sure, was just going on the Wikipedia article I linked.

          But if you’re basing your investment decisions on whether or not A/D is diverging, why didn’t you turn bearish in 2015/16? Obviously that turned out very well for you, but my point is you’re posting about the A/D line most days but when it gave a negative signal back then it was ignored. I just feel like you’ll be bullish no matter what and hence must be long all day every day since nothing is ever bearish to you.

          I’ve got no problem with that as an investor, I’m with you on higher prices in the long long run. But have to be prepared to sit through 50% drawdowns from time to time, and that’s something traders shouldn’t be comfortable with.

      • Anne Day says:

        There are always perceived volatility (news based) and real volatility (number based).
        The latter is VERY low right now if we talk about SPX and NDX.

        • mcgcapital says:

          It’s all relative.. the long run average vix is 20 but over the last 15 years it’s been nowhere near that on a day to day basis, only during corrections and the financial crisis. Rest of the time it seems like 10-13 is about normal in this market when it’s rising. Currently it’s nearly 14 and we aren’t far from the top of the trading range.. it’s picked up over the last couple of weeks and could pick up more if the market was to drop. When I used the term volatile, I’m referring more to the indecision.. one day we’re up and the next we’re down, all within a 1.5% range of course but it’s still pretty indecisive

          • Anne Day says:

            Relative is the word.

            And there is another kind of relativity here.

            Sometimes, I do a little thought experiment, assuming I had not read the news. Usually, this is what we should have in terms of volatility (number based):

            DOW < SPX < NDX

            Right now, the relative order is like this:

            NDX = SPX < DOW

            Why is that? I have been trying to get a clue of it.

            • mcgcapital says:

              I think it’s because of the market environment we have at the moment. Traditionally Dow stocks are blue chip, stable cash flows, mature companies. So you’d expect these to be the least volatile. Then SPX is large cap but has more of a mixture, and Nasdaq is growth orientated so the least stable cash flow wise and the most sentiment driven/risky.

              But at the moment the political agenda is about protectionism, so I think that’s increasing the vol on stocks that are global vs domestic. Plus the dollar is rising and that has a translation effect on multinationals profits. That’s making the Dow the most volatile index.

              Then you have the FANG stocks in what I see as a bubble.. that’s keeping NASDAQ volatility low on a relative basis.

              But low volatility doesn’t mean low risk to investors and high volatility doesn’t mean high risk. Sometimes it’s the opposite (contrarian) and sometimes it’s a continuation pattern. It depends on a myriad of other factors

              • Anne Day says:

                >>Then you have the FANG stocks in what I see as a bubble…

                I deduce that you are likely from an older generation than I 🙂

                The tremendous value brought by A and G in my work and business cannot be
                overstated. I feel I owe them. Buying their stocks could be construed as a form of appreciation on my side.

              • mcgcapital says:

                Haha.. I’m 30. There’s a difference between valuation and a good business though. Just because FANGs have contributed a lot to business and are innovative it doesn’t necessarily mean they will carry on rising or are fairly priced at current levels. Some very good companies fell a lot in 2000-2002 and 2007-2009, then recovered and some.

                I 100% wouldn’t short them given the strength of the trend but also wouldn’t be surprised to see price break at some point given how frothy sentiment is in them. Incidentally, if that happened it would probably coincide with a wider bear market given the importance to global markets of FANG in recent years. We’d be a lot lower without them

              • Anne Day says:

                You are definitely younger 🙂

                Just felt that you were older because you always considered so many factors…

  2. tommyboys says:

    Today pushed WEEKLY A/D to new ATH, with DAILY very close.. No huge calamity anytime soon. Sorry doomers 🤢

  3. kvilia says:

    Keeping a bad CL short over the weekend and looking for pullback to cover – this one gone bad.

  4. Billy says:

    DOW held off calling 9 reds in a row. Yesterday was a fib 8 equaling a record going back all the way to 1978 surprisingly. So a green for the DOW today was very short odds. However the heavy lifting was done overnight. Some will call it distribution, perhaps rightly because come the cash session and there’s no interest to buy. SPX started near its high for the day & finished near its low. DAX and CAC where green but they were more oversold than the DOW to begin with. The uncertainty still lurking in the markets is still clearly evident. What will happen Monday? Well your guess is as good as mine. At the close both DAX and SPX do have potential 3 of 3 down set ups in place but such an outcome actually coming off is rare so I choose discretion and a flat weekend as the markets could just as easily move up early next week. Interesting mix at the moment with the DOW, DAX and CAC oversold and providing a bounce whilst NDX and RUT are coming off a bit after being overbought. SPX lies somewhere in between. Nice and safe weekend to all.

  5. E says:

    Looks like the rebound I was talking about yesterday happened and likely just finished. Will most likely go down from here.

  6. Third strong finish in a row. higher that open each time. The market is so absurdly over valued with trade wars to boot that a drop of a few thousand DOW points seem down right logical if not mandatory. I did add more PUTS at close today. lots of 7/6 expiration.

    • vivelaamo says:

      I love reading your posts yet you make my blood boil. It’s bizarre.

      • Words can’t hurt remember? I control the market as much as a fly controls the wind. Bullish stay bullish. No one listens to me anyway. I do get excited when the timeframe seems very compressed. A breakout next week and all is clear. that simple.

    • Why would smart money exit at last moment? nothing to fear but fear itself. What could possibly go wrong over weekend? Am I the only one loading up on Puts here?

    • torehund says:

      Like Martin A points out, stocks arent all about p/e ratios, its about clinging to the lesser evil at times. This time its about fleeing currencies which favor stocks. Even oil catches a bid which is good for freight. Look at this chart commin of a long drawn 2, bulish or ?

      https://www.investing.com/indices/baltic-dirty-tanker

    • tommyboys says:

      Can’t look at indices levels in a vacuum. A whole lot more goes into it than it’s “under” or “over” valued. Says who? At times a 15 forward PE is way too expensive and is sold down for months. At other times a 25 forward is cheap and bought for months. Sentiment way more meaningful than level.

      • torehund says:

        Livermore- a stock is never too expensive not to buy it, and likewise a stock is never so inexpensive that it is nscessarily a buy.

  7. gary61b says:

    ES 2761 last LIS for today.

  8. CL had a massive breakout, not sure how sustainable it is, looking to exit before Inventories next wed. Thoughts?

  9. Anne Day says:

    Fisher (of the Fisher Investment fame) emphasized repeatedly the need to read global indices.

    Here is my reading:

    DOW up.
    FTSE up.
    DAX up.
    CAC up.
    HengSheng (China) up.
    Nikkei (Japan) down.

    Please check them up on your own.

    Where are Trump’s trade wars? Maybe they are lurking somewhere? I don’t know.

    I think it is rather logical to be thinking of going long at least for the next week. Sell puts if you are conservative; buy stocks (not SQQQ type, though) if you have cash; or buy some calls if you want to have a blast 🙂

    Hasta Luego!

  10. lets see if the 1:30 turn widow gets a squeeze up to 2779-2780

    • Ashley says:

      COMPQ looks like it’s ready to go need a close above the 50 MA on the 60 minute chart at 7735, DOW Is clear for take off…..

      • randomacts4 says:

        Ashley, 17 comments and growing since yesterday. Can you try and cut it down to 3 per day, please; it would be much appreciated. Thx.

        • Ashley says:

          Im sorry, we are at a critical point here, I’ll set up a blog so I can host my charts and thoughts…

          • gary61b says:

            go for it Ashley. do return and invite some visitors..

          • randomacts4 says:

            Thank you. I think that’s a great idea for those like yourself who have a lot to say about the markets. It’s just that it becomes difficult to pour through large amounts of comments on a daily basis here on Tony’s site. No offense intended at all; thanks for listening.

          • micky says:

            great idea .thanks.

  11. soulsurfer says:

    Yesterday the DOW’s RSI5 moved below 13. So what? Well, it’s actually pretty important:

    https://investingintelligent.com/2018/06/22/what-happens-next-to-the-dow-when-this-indicator-gets-low/

    Enjoy!

    • phil1247 says:

      thanks soul
      interesting that you post this today
      i am anticipating a DOW short squeeze
      if we can just rally a little more and break the series down

      cheers !

      • soulsurfer says:

        You are welcome. I hope it’s useful.

      • Ashley says:

        30 minute chart INDU 50 MA 24638 and falling needs to clear that, pos divergence on RSI 5 and MACD, MACD looks good on the 60 minute chart but the 50 just crossed the 200, better get to it bulls the longer you wait the more dire it looks =)

    • Anne Day says:

      Thanks!

      I am a number person rather than a chart person. If possible, I infinitely prefer to make a decision WITHOUT knowing the price of the stock that I want to buy. Price is often a distraction in stock trading. Hahaha.

      • soulsurfer says:

        Hi Anne, honestly I couldn’t agree more. I do most of my trading with a mechanical system that does NOT show price but simple and only buy and sell signals. Just execute those. That’s all we need to know anyway and it makes for much less guessing. I do teach my system btw 🙂

    • Two percent below all time high, trade war started with China, EU, Mexico, Canada. Sounds logical to me. Like my ridiculous adamant position in 2016. In fact I am ever more sure of outcome here.

      Five times so far we hit 2762 and unable to break out? What give with this number?

      • Anne Day says:

        Well, one pausible interpretation is that it should have been 20% higher if no trade wars 🙂

        >>Five times so far we hit 2762 and unable to break out? What give with this number?

        This is the part that puzzles me as well. I am here because I would like to see/learn how people trade who use fundamentally different methods from mine. I have to say that I was quite impressed (actually surprised) with Phil’s prediction yesterday (a top + a flop), which I would not be able to tell in my own system.

      • soulsurfer says:

        Nice wall of worry we can climb.

    • randomacts4 says:

      Soul, looking for more subscribers again?

      • soulsurfer says:

        Not necessarily, but if so “why do you even care!?” And only those who are serious, respectful, humble, and willing to learn a thing or two should consider signing up.

      • random, that was rude. Soul post periodically and provides nice info for free. take it or leave it. I find it helfull

        • randomacts4 says:

          MakeaBuck: My apologies to you and Soul if it came across as rude. Yes, the info can certainly be helpful. I guess what’s at the root of it for me, and this goes for Soul and all others who have done this, is that it can occasionally seem disingenous. It seems the primary goal above all others is subscriber acquisition. Now, if he stated it as such in clear unambiguous terms in the post, I’d have much less of an issue with it because it’s direct and upfront. I’m not saying he’s a bad guy at all. I’m just a bit at odds with how he implements his marketing strategy.

          • chrisk44342 says:

            How else would you suggest he do it? As a former service provider, i can tell you it’s incredibly expensive for a small fry to go out and spend $ on the web to get customers via adwords, cross-linking, etc. Combine that with the fact that most traders chase hot money and leave once the service has a rough spot. His service is of no particular value to me, but it’s obvious he puts some thought into it. So far Tony is gracious enough to allow this and to me it’s no big deal.

            • randomacts4 says:

              Hi Chris – Agree with all your points and yes, Tony has been quite gracious. I’m just suggesting that those who post as advertisements for their own services should state as much up front, that’s all. Maybe an addendum of: please check out my services or something in that vein.

  12. fionamargaret says:

    2465 seems to be where we are going…

    • Anne Day says:

      I like a flush. How about 2345 or 3456?

      • Ashley says:

        Shall I “take one for the team” and go long??? LOL

        • fionamargaret says:

          Ashley, you surely did take one for the team, taking the heat for my postings seems above and beyond though…
          I don’t want you to leave…you give terrific input (and have a Winnebago!) x

    • Parveen Mundlia says:

      Every single day same gibberish. It seems you are going Holly’s way. Lemme predict your comment for tomorrow and day after and so on – Long bonds, Short SPX.

      • Ashley says:

        Nope, Im looking for 2820’s to start shorting so lets get it going already…. BTW I’ve been calling for this rally since the inverted H/S broke at the 2731 pivot .)

        • Parveen Mundlia says:

          I was replying to Fiona. She repeats the same thing over and over again. The only contribution she does is flood the blog with music videos from youtube and her bearish stance which hasnt materialised since long. She is gone Holly/Gary Leiboshitz way. And then when she is cornered she will bring up original five or seven whatever theory as if she has more right on the blog or something. Pathetic.

      • When the market ignores 66% of CFO’s opinion that trade war will impact them in the next 6 months you have to ask yourself is the market smarter than the companies CFO’s? Now we have a full blown war with China. No doubt about that. With the EU the exact scenario is playing out. AUTOS is here. Yup trump just announced a 20 percent tariff. Do YOU and the Market still think he is bluffing? It Is Impossible for the market to gain traction with a world wide trade war. This is as insane as the notion we were crashing in 2016 when the consumer was in the best shape of decades past. I deal all my life in logic. this is not logical. No amount of daily manipulation can change the course of the market and profits. it will be devastatingly clear soon enough. if EU goes the way of China you can forget about a rebound after the crash also. Impossible to make money when the world is so inter connected breaking that connection. IMPOSSIBLE!

        When the market is this illogical you have to take advantage. It came in 2016 and now in 2018. not very often. BTW what’s so important about 2762. HIT 4 TIMES without punching thru.

        • Ashley says:

          2762 is the falling 50 MA on the 30 minute SPX chart, now 2761, its crossed with the 200 at 2766….

        • Anne Day says:

          According to Sun Tzu (The Art of War):

          If you know yourself AND your enemy, then there is no danger in fighting hundreds of battles.

          I don’t feel that you understand China very well.

          You seem to automatically assume that China is some kind of invincible Dragon. Is she? My understanding is that China is currently in a bigger mess than US. I read some reports stating that they may introduce rules to stop people from selling houses freely. Sounds like an ingenious way to prevent house price from falling, right?

          • fionamargaret says:

            Anne, if you would like to speak about China, speak with Bud.
            Last time he spoke with me he was in China (for a few months), but I think he is back now.
            He is a great guy, and very easy to talk with.
            One of my “volunteers” who helps with dogs, gardening and basically posts my missives when I am away, is a Chemical Engineer whose brother-in-law is a Chinese Lawyer..ex Chinese military….always different perspective…{he helps in.alliances for firms expanding to China).
            He is not thrilled by my saying we are going to war with China….x

            • Anne Day says:

              Fiona,

              I feel this is a bit like asking someone’s opinion on US. Bud could be Gary here or he could be, say, Vivelaamo. If he happens to be Schizo, then it really depends on which day my asking happens 🙂

              Thanks for offering.

              Have a wonderful weekend!

              • fionamargaret says:

                There was a time when there were only a few of us here, where honesty and caring had a place. We knew each others’ lives to the extent that is possible in correspondence.
                Bud was one of them.

  13. Sixth day in a row gold is under the lower bb.Ira said yesterday,”There’s a ZERO chance of it happening today and from now on.May go to 6 or 7 or 8 days,but eventually a rally of some kind.Not bullish though.”The charts look like 1240 to me eventually.The “rally” may be a one or two day wonder,with no +div in sight.GL all.

  14. HUGE! I mean huge number of extremely BULLISH candlesticks. Right at the critical 9 point mark that seems to be an important mark. The PPT has done this for 8 days now and got a slow trickle down. it will fail BIG soon. Holding the dam from breaking with Elmer’s glue isn’t going to cut it.

  15. CampFreddie says:

    I like the way futz is behaving, and would not be surprised to see 2778/80 today. glta.

    • Ashley says:

      Bulls need it to close above 2770, COMPQ has a nice neg divergence on the MACD on the 60 minute chart and it needs to hold 7675, DOW “industrials” need to get over 24666 to try to jump the lower TL at 24865, 60 minute chart is “bullish”, pos divergence on RSI and MACD on SPX 60 minute chart, the only thing missing??? Wheres the rally???

      • Anne Day says:

        I just ran some numbers. The volatility for UDOW is about 35% (using 21 days average). My bet is that it will be reaching below 30% soon. Then we will have rallies. Many of them 🙂

        By the way, I do not trade DOW. I primarily use it to measure the temperature of Trump’s trade wars. It is a canary bird sort of thing for me.

  16. Ashley says:

    Looks like we are about to lift off, if this is a bull you would expect it to blast right through 2780, maybe pull back find support then the same at 2798…..

  17. gary61b says:

    ES If 55.25 holds no need to read any further. 2752 level will have a hick up at least and fill gap on ES overnight, magnets at 54.5 and 49.5.. I want to see 2741 and then looking for 2700-2690 for possible D.. drop below 2670 no more longs in play on daily.

  18. stan911 says:

    Gap still at 2751 and 2769 and 2783

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